When a trading rule is broken or a significant loss occurs, follow this structured, time-phased protocol to reset mentally, analyze objectively, and prevent emotional compounding of errors. The focus is on protection first, learning second, and gradual return to full risk.
Post-Loss Recovery Protocol
Immediate Actions (within 1 hour)
Close all trading platforms and charts. Stop trading immediately to prevent further damage.
Document what happened (factually, no emotion):
What rule was broken?
What was the emotional trigger?
What was the actual $ loss vs. planned risk?
Physical and mental reset. Take a 10-minute walk, do breathing exercises, or a brief meditation to clear your head.
Same Day Review (1–4 hours later)
Review the trade against your written rules:
Was it a valid setup? Yes/No
Was position sizing correct? Yes/No
Was stop-loss honored? Yes/No
For any "No" answers, write: "I will [specific actionable step] to prevent this next time."
Calculate the impact on performance:
Is this loss within your acceptable drawdown limits? Yes/No
Does this require temporarily reducing overall position sizes? Yes/No
Before Resuming Trading
Take a mandatory break. No trading for at least 24 hours (longer if emotions linger).
Re-read your trading rules out loud. Reaffirm your commitment to the process.
Commit to ONE specific improvement for the next trading session.
Reduce position sizes by 50% for the next 3–5 trades to rebuild confidence under lower pressure.
Resume normal risk only after 3 consecutive rule-compliant trades.
This phased protocol turns setbacks into structured growth opportunities. Mistakes are inevitable in trading — what matters is how quickly and systematically you return to your proven process. Consistency over time, not perfection, builds long-term success.
